On July 30, 2013, Paul Craig Robers writes on OpEdNews:
Social costs are costs of production that are not born by the producer or included in the price of the product. There are many classic examples: the pollution of air, water, and land from mining, fracking, oil drilling and pipeline spills, chemical fertilizer farming, GMOs, pesticides, radioactivity released from nuclear accidents, and the the pollution of food by antibiotics and artificial hormones.
Some economists believe that these traditional social costs can be dealt with by well defined property rights. Others think that benevolent government will control social costs in the interests of society.
Today there are new social costs brought by globalism. For developed countries, these are unemployment, lost consumer income, tax base, and GDP growth, and rising trade and current account deficits from the offshoring of manufacturing and tradable professional service jobs. The trade and current account deficits can result in a falling exchange value of the currency and rising inflation from import prices. For underdeveloped countries, the costs are the loss of self-sufficiency and the transformation of agriculture into monocultures to feed the needs of international corporations.
Economists are oblivious to this new epidemic of social costs, because they mistakenly think that globalism is free trade and that free trade is always beneficial.
Economists are also unaware of the social costs of deregulation. The ongoing financial crisis which requires massive public subsidies to “banks too big to fail” is a social cost resulting from government accommodating Wall Street pressure to deregulate the financial system by repealing the Glass-Steagall Act, by removing the position limits on speculators, by preventing the CFTC from regulating derivatives, and by turning the Anti-Trust Act into dead-letter law and permitting massive economic concentrations. The social costs of successful corporate lobbying is enormous. But economists who believe that markets are self-regulating imagine that an enormous gain in efficiency has occurred, not massive social costs.
In order to keep the deregulated financial system afloat, the Federal Reserve has monetized trillions of dollars of debt over the last several years. Real interest rates have been driven into negative territory. Retirees are unable to earn any interest income on their savings and have to draw down their capital in order to cover their living expenses.
The liquidity injected into financial markets by the Federal Reserve’s policy of quantitative easing has produced huge bond and stock market bubbles. When they pop, more American wealth will be wiped out and more jobs will be lost.
Consider just one example of the social costs of jobs off-shoring. When US corporations produce abroad the goods and services that they market to Americans, the goods and services that flow into the US arrive as imports. Thus, the trade deficit rises dollar for dollar.
http://www.opednews.com/articles/The-Social-Cost-Of-Capital-by-Paul-Craig-Roberts-130530-389.html
